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Unity Bancorp Q2 core source of earnings increased to $8.4 million

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Staff writer ▼ | July 21, 2015
Unity Bancorp, parent company of Unity Bank, reported increased second quarter and year-to-date earnings. Company's core source of earnings, net interest income, increased $1.1 million to $8.4 million for the quarter ended June 30, 2015 compared to the prior year's period.
Unity Bancorp
Unity Bancorp   The net interest margin increased 21 basis points
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This increase was the result of the strong loan growth in residential mortgage, commercial and consumer loans.

Quarterly average residential mortgage loans have increased $58.8 million, average commercial loans increased $52 million and consumer loans increased $19.6 million compared to the comparable quarter in 2014.

Partially offsetting this increase was the lower level of interest income due to our smaller investment portfolio and the slight increase in deposit interest expense.

The net interest margin increased 21 basis points to 3.70% for the quarter ended June 30, 2015 compared to 3.49% for the prior year's quarter.

The expansion in the net interest margin was due to strong loan growth, lower security balances and the repayment of $10 million in high rate borrowings.

Noninterest income increased $253 thousand to $1.9 million for the three months ended June 30, 2015, compared to the same period last year. For the six months ended June 30, 2015, noninterest income increased $368 thousand to $3.5 million, compared to the same period a year ago. Quarterly and year-to-date noninterest income increased due to higher gains on the sale of mortgage loans and increased service and loan fee income.

During the quarter, $49.8 million in residential mortgage loans were originated, of which $24.0 million were sold at a gain of $687 thousand, compared to $36.3 million originated and $11.1 million sold at a gain of $188 thousand during the prior year's quarter.

For the six month period, $86.9 million in residential mortgage loans were originated, of which $42.2 million were sold at a gain of $1 million, compared to $58.5 million originated and $28.6 million sold at a gain of $553 thousand in the first half of 2014.

All residential mortgage loans originated in 2015 that are held in portfolio for investment are adjustable rate mortgages or 15 year or less fixed rate mortgages.

Service and loan fee income increased $181 thousand and $182 thousand respectively for the three and six months ended June 30, 2015 due to increased loan processing and payoff charges.

In addition to the noninterest income increases noted above, other notable items included: there were no SBA loan sales this quarter, and gains on the sale of securities were significantly less at $28 thousand this quarter compared to $268 thousand in the prior year's quarter.

Noninterest expense increased $508 thousand to $6.7 million for the quarter and increased $751 thousand to $13.2 million for the six months ended June 30, 2015, respectively. The majority of the increase in each period was due to higher compensation and benefits expenses.

Compensation and benefits expenses have increased over the past twelve months due to increased head count in loan origination and support staff; as well as higher mortgage commission expense due to the larger volume of mortgages originated.

Other expense increases included: higher software maintenance expense, advertising, marketing agreements and seasonal events expense as well as director fees. OREO expenses for the quarterly and six month periods decreased due to lower property tax, maintenance, utility and legal costs to hold these properties.

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